Banks to Resume Dollar Loans as Naira Appreciates

• Banks to Resume Dollar Loans as Naira Appreciates

Indications have emerged that Deposit Money Banks will soon start to raise dollar-denominated loans, especially Eurobonds, as the naira continues to appreciate.

It was learnt that banks were now favourably disposed to raising dollar loans following the creation of the Investor & Exporters FX window by the Central Bank of Nigeria and the subsequent appreciation of the naira.

Another reason the banks are considering Eurobonds, according to top banking sources, is because some of them are looking at refinancing their dollar loans, which will soon start falling due.

The top bank executive said, “Many banks have no choice than to raise dollar loans or Eurobonds partly to refinance their Eurobonds falling due, or to take advantage of the appreciation in the naira value to raise dollar funding.”

While Guaranty Trust Bank Plc’s $400m Eurobond is due in November, Fidelity Bank Plc’s $300m is due next May. Access Bank Plc has $350m of bonds due in July.

GTBank has said it has no plans to issue fresh Eurobonds, but Fidelity Bank and Access Bank have yet to decide.

Economic and financial experts agree that the banks will start to raise dollar-denominated loans.

Even so, more lenders will issue Eurobonds because they need dollars to offer loans in the United States currency or to repay debt, an analyst at Vetiva Capital Management Limited, Mr. Lekan Olabode, told Bloomberg, adding that more banks would issue Eurobonds, because they needed dollars to offer loans and to repay debt.

Already, Ecobank Transnational Incorporated has said it is planning to raise $400m five-year convertible bond this month to refinance debt and provide short-term bridge funding for non-performing loans at its Nigerian unit.

Experts believe more banks will raise dollar loans this year and next year.

Already, United Bank for Africa Plc has raised $500m in its first Eurobond sale.

It issued the bond on June 1. This followed an equivalent issue a week earlier by Zenith Bank Plc in a deal that was four times oversubscribed.

It is difficult to put a figure to what the expected dollar loans will be but analysts believe that as the I & E FX window continues to improve, more banks will take advantage to raise extra dollar loans.

The CBN on Thursday said its new currency window for investors had handled $2.2bn of trade in six weeks.

It also said it accounted for almost 30 per cent of the $2.2bn transactions, adding that this was meant to keep the window operating.

The CBN had about six weeks ago created the Investors & Exporters FX Window to attract foreign investors and at same time maintain a strong currency to ward off inflation.

Analysts have lauded the initiative as a step in the right direction.

However, some experts, including a former Governor of the CBN, Prof. Charles Soludo, said although the initiative, among others taken by the regulator in recent times, had moved the forex market forward by 10 steps, there was a need to take about 90 extra steps to get the economy to where it ought to be.